Financial Times FT.com

Why free markets have little to do with inequality

By Philip Whyte

Published: June 2 2008 03:00 | Last updated: June 2 2008 03:00

Many Europeans believe liberal economic reforms are incompatible with social justice. The US and the UK, they point out, have more liberal markets for products and labour than in continental Europe - but also higher levels of poverty and income inequality. European countries therefore face a choice. They can either free their product and labour markets and accept the downsides or they can protect social solidarity by resisting Anglo-American neo-liberalism.

But the belief that market liberalisation increases social inequalities is not borne out by the evidence. The UK certainly has higher levels of poverty and inequality than France or Germany. But pointing this out is just selective use of evidence to support a predetermined conclusion. If there were a strong correlation between levels of market liberalisation and social outcomes, one would expect to see the pattern replicated across the European Union - not just in a carefully selected group of countries.

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